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Columbia Plans to Unload Propane, Petroleum Marketing

Columbia Plans to Unload Propane, Petroleum Marketing

Less than one month after announcing the sale of its Cove Point LNG facilities to Williams for $150 million, Columbia already is putting more assets on the block. It has decided to sell Columbia Propane Corp. and Columbia Petroleum.

Columbia Propane is the fifth largest propane marketer in the United States with operations in more than 30 states and nearly 350,000 customers. Annualized sales are 270 million gallons. The Columbia subsidiary has been a clear target for growth over the past two years. It is operator and half owner (with Conoco) of Atlantic Energy, Inc., one of three exclusive propane import terminals on the East Coast. Located in Chesapeake, VA, on the Elizabeth River, Atlantic Energy has two 10-million gallon storage tanks.

Columbia Petroleum, based in Richland, PA, engages in retail and wholesale petroleum product sales, transportation, and branded gasoline distribution. In addition to its primary service territory in Pennsylvania, Columbia Petroleum also serves customers in New Jersey, Maryland, and Virginia. Its annualized petroleum sales are 320 million gallons.

Company officials said the planned dispositions resulted from its ongoing evaluation of assets in view of the company's "business priorities." It was determined that these assets are not consistent with Columbia's long-term strategy, company officials said in a statement.

The announcement marks a reversal of the company's strategy of the past two years during which it purchased several propane operations, including Washington Gas' Frederick, MD, propane assets, ZerGas' Virginia propane assets, Lefleur's propane and petroleum marketing assets, and the largest purchase, National Propane, for $80 million. In late 1998, the company set a goal to have 30% of its operating revenue generated from nonregulated activities by year-end 2001 and propane clearly was to be a large part of that expansion. However, a reorganization of its non-regulated businesses early last year, including the hiring of Brian Watt as CEO of Columbia Energy Services, led to the eventual sale of wholesale marketing and trading and further changes in business structure and management.

The company's strategy has turned to strengthening core operations of transportation, distribution and storage, said spokesman Al Rankin. He also said Columbia's review of assets and operations is going to continue. Rankin said the asset sales are not directly related to the company's proposed $6 billion merger with NiSource Inc. The merger is progressing, with completion expected by the end of the year. Following completion, however, NiSource is expected to sell off a significant amount of assets, potentially as much as $1.5 billion. The combined company will have an enterprise value of about $14 billion.

A briefing package for potential buyers of the propane and petroleum marketing assets is being prepared. Interested parties should contact Philip Aldridge, vice president of corporate finance at Columbia Energy Group, (703) 561-6197. For specific information regarding Columbia Petroleum, contact Greg Driscoll, managing director of Legg Mason at (215) 496-8314.

Rocco Canonica

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